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A new Manhattan Institute report looks closely at rising tuition prices and aims to answer one question: Why has market pressure failed to mitigate inflating prices, as it would in other competitive markets for products and services?
Author Beth Akers, a senior fellow at the conservative think tank, offers four distinct answers.
The first is that students have poor information about the value of colleges and their majors, and they often overvalue the return on a college degree.
“Historically, the emphasis from political leaders has been on promoting college enrollment and degree completion rather than encouraging savvy shopping for colleges and degree programs,” Akers writes.
Another reason is the “invisible menu,” with makes comparison shopping between colleges difficult and expensive. Part of this is due to the lack of transparency surrounding grant aid; students don’t know how much aid they might receive until they apply -- they can only see the sticker price. Akers suggests overhauling the applications for Pell Grants and other financial aid so that students can see how much they may receive using a “simple look-up table.”
Akers discusses oligopolistic competition within individual geographic areas, where students are forced to pick from the colleges physically nearby or a relatively small selection of online programs. A growing number of students “don’t pick up and move their lives across the country” to attend college, she writes.
She also argues that existing regulation snuffs out competition that subverts existing business models and recommends higher education “eliminate the existing accreditation system as the gatekeeper for federal student aid” and replace it with an outcomes-based accountability system.
